In our distant past, our ancestors would consult with an assortment of gods for guidance. Later, we developed the system of sovereign rulers on the assumption that they and their offspring would provide the leadership needed. Although we look back with scepticism as to the mechanisms that these schemes were based on, we readily accept the same un-scientific assumptions about our current leadership models, both political and business.
Thinking about any organisation as a computational system, leaders can be defined as the central processing units. Although this sounds like a very abstract approach, it is helpful in bringing a perspective to our current paradigms for leaders and the possible routes forward.
Firstly, it sets leadership firmly in the context of an organisational process. Information flows into and around the organisation with some degree of local processing but passes along the internal lines of communication to the centres of leadership. At that point, the information is processed and instructions passed out to the organisation. Even with the view of the leader as a visionary or culture creator, information still flows to the leader, they process it and instructions flow out.
With the systems approach, it becomes very clear that with the overhead and information loss of the internal lines of communication along with the computational overload on the central leadership unit, the organisation’s overall computational ability peaks very soon. This places fundamental limits of organisational size which, we will argue, is significantly smaller than the current notions.
The other major consideration is the selection and performance management of the leader. Given lengthy internal lines of communication, it is increasingly difficult for the led to evaluate the leader. Through the same mechanism, it is increasingly easy for power to be centralised, in particular control of resources. As before, this puts a fundamental limit on organisational size for effective leadership performance management.
The question now arises as to what is the optimum size for a well-led group? Without having had the opportunity to scientifically establish this number, I suggest that it is around the size that the previous 200,000 years of modern humans evolved for. There are two group types, the action group and the community group. The former is the hunting party of around 10 and the latter is the village of around 120. Furthermore, the group structures are also based on long-term group stability and continuity allowing group members to build up intimate knowledge of each other and trust relationships.
The notion of hunting party or village leadership also nicely defines exactly what leadership is. It is a decision-making process for the group in terms of actions and the allocation of resources to perform those actions. It also sets the overall direction of those actions and manages the performance of the group members in terms of the tasks they are responsible for. The leader also sets the shared values and system of fairness and justice within the group. But the most important aspect of good leadership is good governance. The group decides on the leader and has all the information to make an informed choice.
In contrast, the demands and expectations of current leadership are so unreasonable as to be delusional. Taking political leadership as the extreme case, the paradigm breaks down at every level and has done, consistently, over many decades. How can any human being have the ability, experience or work-rate to run Government effectively, particularly within the short periods of time between the elections? Indeed, it is most remarkable that the system performs as well as its does.
In spite of the chronic failure of leadership, the delusion is very persistent. The main reason for this is the absence of any competing and superior alternative. By example, no one seriously considers the communist economic model, with its associated leadership model. Yet it failed for exactly the same reasons that the Western models fail, the only difference was the much greater degree to which it failed. The survival of the Western model creates the delusion that it is working well because there is currently no competing alternative, other than MIX?
Given the proposition of optimum group size - we claim that current organisational models are hopelessly past their optimum size for system effectiveness - the problem arises as to how to have any organisational structures bigger than hunter-gather communities.
This brings us to propose a candidate for a new organisational and leadership model. The clue is to observe how Western economies significantly outperformed centralised communist economies by what they did differently, rather than the same, albeit less, i.e. central control. The mechanism was complex system optimisation and the phenomenon of emergence in a free market. There was no need for a central planning organisation for the production and supply of, for example, bread or shoes, something that the communist system spectacularly failed to achieve. In the Western system, the supply chains self-organise (local information processing, decision-making and resource allocation) and the efficient supply of bread or shoes emerges as a function of the system/market rules, not a central command and leadership unit. Even more so, it is inconceivable how any central system (Corporate or State) could create Silicon Valley and the IT revolution. In fact, the IT revolution would not have happened with the traditional leadership command model.
This leads to two inter-related organisational and leadership models, the first is nested structures (for the mathematically-minded, fractals) when the traditional hierarchy is replaced by a nested pyramid of self- optimised groups i.e. business/operational units of around 120 with a leadership team of around 10. The essential definition of the basic unit is local decision-making and control of resources. A four-layer structure would equate to 120,000 individuals which is as big as many large corporations. The second is the network structure whereby each “node” has a collaborative relationship with each adjacent node governed by the simple rule that the distribution of resources takes place at the point of exchange – the point of exchange being any goods or services received or provided between the nodes. Clearly, networks can grow without limit in terms of size or geographical spread; supply chains being one such example.
The traditional hierarchy, with its centralise command and control leadership, is based on the assumption of the economies of scale. But this assumption is soon breeched as the organisation grows past an optimum size. In contrast, the new structures are explicitly designed for their optimise size and to grow no larger. Furthermore, the dis-economies of scale – the computational limits – that command hierarchies soon suffer from means that the new structures significantly outcompete as they out-compute. This is not an abstract advantage as we mean it is the same sense that humans out-compute the rest of the natural world which is the basis of our success as species. The increase of performance of distributed leadership derives directly from accessing greater brain-power and along shorter lines of communication. This results in greater organisational agility and better allocation of resources – in simple terms, superior decision-making.
The new paradigm of nested self-organising groups within extended networks also forces some big decisions for both organisational structure and leadership, namely, the new system is explicitly diverse and darwinistic. There is no single definition of leadership, only a diverse range of practices within a darwinistic ecology. Although the wise and gentle leader might be an appealing idea or the decisive and strong leader an attractive idea, it is the diversity and flexibility of leadership styles combined with the “survival of the fittest” that is the strength of the distributed organisation. In comparison, it is the mono-culture of the traditional organisation that is its fundamental weakness. No matter how effective a particular leader and their style is, it will eventually prove to be ineffective or inappropriate at some time in the future and it is, at this crisis point, that the whole organisation becomes jeopardised, often fatally.
The biggest challenge to new thinking is, as with any delusion, the prevailing set of beliefs tend to ignore or fit information into supporting the delusion. This is that the current organisational and leadership models only need to be reformed or that better leaders sought for the problems to go away. Our response is two-fold. Firstly, if this were the case, then it would have already been solved during the last 50-60 years of modern management. If something is persistently hard to solve, one can assume one is apply the wrong solution. Secondly, if the current models are so effective, why have they never produced the historical achievements of not just Silicon Valley but the industrial revolution, the scientific revolution, the Renaissance or Classical Greece? In stark contrast, they were actually achieved through either small optimised groups or network structures which then went on to displace those parts of the world that were dominated by large-scale centralised hierarchies.
It’s rather odd that we are still having sorts of theological debates about leadership. Organisations are systems, systems can be analysed and optimised. We use scientific methods all the time, it’s about time we used them on leadership. The first steps are to use the powerful modelling tools we have, particularly in systems and business process engineering, and apply them to simulate existing corporate organisational and leadership models and compare with the new alternative models that are increasingly challenging the old assumptions. With such modelling tools, we can incorporate outputs from the MIX “LEADERS EVERYWHERE CHALLENGE” to test the various hypothesises in a systematic and objective way. Any exhortation for our leaders to simply be better is doomed to fail, suggestions on how to improve the current systems will only succeed in prolonging the decline. We need to stop working in the organisational equivalent of the geriatric ward and start working in the maternity suite.
This is a great article. I agree with your 'small is beautiful' thesis and the need for an organisational design which facilitates good leadership, innovation and engagement. It will also require corporate command and control systems to be redesigned to manage the inter team dependencies and provide non-intrusive, situational awareness information to senior management and share holders. One of the main challenges to implementation will be persuading senior managers to give control back to their people.
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Hi Martin. Thanks for your nice comment. The main challenge your identify is how to persuade senior managers - but of course, that's actually the root of the problem. Namely, having to persuade senior managers rather than have better quality decision-making built into their organisations. Therefore, given the current status quo, it's a problem. In the long term, Darwinistic selection is a great persuader so I guess it a process of those more adaptable organisations replacing those who are still waiting for senior managers to be persuaded. In the meanwhile, initiatives such as the MIX Challenge contribute a great deal to raising awareness of new ways of thinking and enabling the adaptive managers to gain the advantage.
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Excellent! This is what we need here at MIX. The current paradigm stopped scaling decades ago. Smaller and more agile is the answer - the blind watchmaker is the model.
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